Integrated hospital with Allopathic care and Ayurvedic research held charitable under s.2(15); depreciation allowed on medical assets

HC allowed the assessee's appeal, holding its institution's running of an integrated hospital (including Allopathic treatment) and Ayurvedic research falls within its charitable objects under s.2(15). The court found such activities reasonably incidental to improving the Ayurvedic system and that AO and Tribunal erred in branding them ultra vires. Longstanding revenue acceptance of the exemption weighed against reopening liability absent a plainly unsustainable basis. Depreciation on assets used for Allopathic medical relief was held allowable, since the hospital activities were within the assessee's objects.

---

---

Issues Involved:
1. Denial of exemption under Sections 11 and 12 of the Income Tax Act, 1961.
2. Applicability of the principle of consistency in granting exemption.
3. Entitlement to depreciation on assets used for providing medical relief through the Allopathic system of medicine.

Detailed Analysis:

1. Denial of Exemption under Sections 11 and 12:
The primary issue was whether the activities of the Assessee, a Charitable Trust running a hospital offering both Allopathic and Ayurvedic treatments, were in accordance with its objects, thereby qualifying for exemption under Sections 11 and 12 of the Income Tax Act, 1961. The Assessing Officer (AO) denied the exemption, asserting that the Assessee's activities, predominantly Allopathic, were not in line with its objects, which primarily focused on Ayurvedic medicine. The Tribunal upheld this view, concluding that the Assessee's activities in the Allopathic system were ultra vires its objects. However, the High Court disagreed, emphasizing that the Assessee's objects included improving the Ayurvedic system with the help of other medical systems, including Allopathy. The Court noted that the Assessee's integrated approach in running a hospital providing both Ayurvedic and Allopathic treatments was conducive to its charitable objects and not ultra vires.

2. Applicability of the Principle of Consistency:
The Assessee argued that its activities had been consistently accepted as charitable, and exemptions under Section 11 had been granted for several decades. The High Court acknowledged the principle of consistency, citing past Supreme Court decisions, and held that it would not be appropriate to change a long-standing position without any material change. The Court noted that the activities of the Assessee had remained the same since 1959-60, and the Revenue had accepted the Assessee's claim for exemption under Sections 10(22), 10(22A), and 10(23C) in the past. Therefore, the AO's and Tribunal's departure from this established position was unjustified.

3. Entitlement to Depreciation on Assets:
The Tribunal had denied the Assessee's claim for depreciation on assets used for providing medical relief through the Allopathic system of medicine, based on the view that such activities were ultra vires the objects of the Trust. The High Court, having concluded that the Assessee's activities were within its objects, held that the Assessee was entitled to claim depreciation on these assets. The Court referenced a Division Bench decision, affirming the Assessee's right to depreciation on assets used in its charitable activities.

Conclusion:
The High Court set aside the Tribunal's order, ruling in favor of the Assessee on all counts. It held that:
- The Assessee's activities, including running an Allopathic hospital, were in line with its charitable objects and thus entitled to exemption under Sections 11 and 12.
- The principle of consistency applied, preventing the Revenue from challenging a settled position without material change.
- The Assessee was entitled to depreciation on assets used for providing medical relief through the Allopathic system of medicine.

The appeal was disposed of with no order as to costs.

---